PSST, Cyren Call refute allegations

Officials for the Public Safety Spectrum Trust (PSST) and PSST advisor Cyren Call acknowledged that representatives of potential D Block bidders were told that a spectrum-lease arrangement would be part of the deal but refuted reports regarding the terms cited in various Internet blogs.

Yesterday evening, the PSST and Cyren Call issued separate press releases within minutes of the FCC lifting its anti-collusion rules related to the 700 MHz auction that prevented anyone involved in the auction from speaking about subjects that could impact bidding. As the licensee of 10 MHz of public-safety spectrum that would be paired with 10 MHz of D Block spectrum, the PSST—and, therefore, Cyren Call—were prohibited from speaking about events related to the auction until the anti-collusion rules were lifted.

During this period, which began in December, Internet blogs and news reports cited anonymous sources in reporting that Cyren Call—led by former Nextel Communications co-founder Morgan O’Brien—told Frontline Wireless that the PSST would seek $500 million in spectrum-lease payments over a 10-year period from the D Block winner as part of a network-sharing agreement. Some blogs reported that this stipulation prevented Frontline Wireless from securing funding for its business plan, leading to the company closing its doors on the eve of the auction.

While both the FCC’s 700 MHz order and the PSST’s bidder information document cited the possibility of a spectrum-lease arrangement with the D Block winner for use of the PSST’s spectrum, neither provided a dollar-figure estimate. To provide potential bidders with an idea of the possible value of a spectrum-lease arrangement, Cyren Call told representatives of Frontline Wireless and other potential bidders that the PSST was expecting about $50 million in the early years of the partnership, when the PSST would have no other revenue sources, O’Brien said today in during an interview with MRT.

Contrary to Internet blog reports, O’Brien said Cyren Call did not tell Frontline that a $50-million-per-year lease payment would extend for 10 years and it did not claim that it was a “demand” from the PSST.

“We would say, ‘Think of it as an annual lease payment, but it is subject to a half-dozen things spelled out in the bidder information document, including the negotiation process and FCC approval,” he said. “We did not demand anything—that was the antithesis of the process that we launched.”

PSST Chairman Harlin McEwen echoed this sentiment.

“For people to jump to the conclusion that it would be $50 million every year for 10 years, that’s nonsense,” McEwen said during an interview today with MRT.

In addition, O’Brien said the spectrum-lease-payment amounts could vary, based on the business model of the D Block winner, some of which might prefer a flat spectrum-lease payment while others would prefer the PSST to realize value from its spectrum from preferential airtime pricing for public-safety customers.

“There’s going to be a functional variable relationship between that and whatever the lease payment is,” O’Brien said “The better the lease payment, probably the less-good deal we’d get on the airtime and vice versa.”

However, prior to the network being operational, there is no value associated with preferential airtime rates, which is why the spectrum-lease alternative is so important to the PSST, O’Brien said.

“Early on, when there isn’t any bulk airtime to give, there isn’t any other realistic source of revenue that we could think of to support the operations of the PSST,” he said.

Because neither Cyren Call nor the PSST could respond prior to last night, Cyren Call was a “convenient punching bag” for Internet bloggers wanting to place blame on the failure of Frontline Wireless, O’Brien said.

McEwen also expressed frustration at the allegations but said he does not believe that the prospect of a spectrum-lease payment undermined the ability of Frontline Wireless to secure funding.

“If you don’t understand that we’re talking about a $15-20 billion network, $500 million is a lot of money,” McEwen said. “People have speculated that our requirements are what caused their demise, that’s absolutely ridiculous. [Frontline Wireless] just couldn’t raise the money, and [the people speculating] don’t want to admit that.”

McEwen said the fact that Frontline Wireless pulled out of the auction played a major role in the D Block not receiving a bid that met the FCC’s reserve price of $1.3 billion.

“Once [Frontline Wireless] no longer was a bidder, carriers like Verizon and AT&T didn’t see a threat from another competitor and didn’t worry about it—that changed the whole complexion of the auction,” McEwen said. “For them to blame us on causing a change in the auction is disingenuous in my view.”

An attempt by MRT to get a comment from a former Frontline Wireless representative for this article were unsuccessful.